Nepal’s political and economic landscape has entered a phase of rapid transformation following the formation of a new government under Prime Minister Balendra Shah, with early policy actions and enforcement measures shaping investor sentiment.

In its first cabinet meeting, the government decided to implement the recommendations of a commission led by Gauri Bahadur Karki regarding the Gen Z movement. As part of the decision, former Prime Minister KP Sharma Oli and former Home Minister Ramesh Lekhak have reportedly been detained, escalating political tensions. In response, the CPN-UML has announced protests both in parliament and on the streets, intensifying the political environment.

Parallel to these developments, Finance Minister Swarnim Wagle has initiated a reform-driven agenda, announcing plans to scrap 15 outdated laws identified as barriers to economic growth. These laws, dating back to 2013 and 2019 (B.S.), were considered restrictive to private sector expansion. The move is based on recommendations from a high-level economic reform taskforce led by Rameshwar Khanal.

Wagle has also outlined broader policy priorities, including expanding the tax base while lowering rates, shifting from heavy regulation to facilitation, and allowing greater participation of Non-Resident Nepalis (NRNs) in Nepal’s secondary stock market. These measures are seen as critical steps toward improving capital market depth and investor confidence.

Despite political volatility, market analysts suggest that the Nepal Stock Exchange (NEPSE) may experience only short-term fluctuations. Increased trading volumes and turnover indicate that institutional or “smart money” investors may already be positioning themselves in the market.

Globally, escalating tensions in West Asia, particularly the Iran-Israel conflict, have weighed on major stock markets due to concerns over oil supply disruptions and economic uncertainty. However, Nepal’s market has so far shown resilience, supported by expectations of political stability and reform-oriented governance.

From a technical standpoint, NEPSE remains in a strong position. Rising turnover and sustained Relative Strength Index (RSI) levels above 70 indicate continued bullish momentum. The hydropower sector, in particular, has been showing notable strength, reaching new highs amid increased investor interest.

Overall, while short-term volatility driven by political developments and global uncertainty cannot be ruled out, the government’s reform agenda and pro-business stance are expected to support a positive long-term trajectory for Nepal’s capital market.